Where is the value in buying a condo?!

15 Replies

new to real estat . Started getting my feet wet and browsing some condos in my area. 

I always thought the sooner you buy then sooner you own the better. 

But when looking at condos and these outrageous HOA fees - I just don't see the value anymore.

Isn't the point to eventually live rent free? I mean $800+/monthly in HOA is crazy .

So why do it. Nevermind for means of profit or residuals, but for ones self.

Am I missing something lol?

Compare that $800 monthly to what it costs over time to maintain a SFR. Unless the $800 is used to support amenities that you or your renter doesn't value then it will probably be a lot less than the maintenance on a SFR.

For me its all about cash flow. Condo fees can really eat away at your cash flow. Look at your numbers before you buy a condo and figure out how much cash flow will end up in your pocket each month. I just wholesaled a condo which I got under conrtract for 10K and wholesaled it for 15K. It was a 2 bedroom 2 bath, rents for $850.00 HOA fees are $321.00/mos. He paid cash for it so he has no mortgage. THe HOA fees cover the water bill, insurance for the exterior building which includes the roof and security. So do the math and if the numbers work in your favor then you decide what yo want to do. Every deal is unique. During my education I was taught to stay away from condos but in reality just run the numbers and then make your decision.

Ronnie, 

Any particular reason why you were told to stay away from condo's?

Thanks for both responses

Well really if you think about it you only own the inside walls of the condo. The fees can be high and you need to consider this into your calculations before you buy. Find out what the monthly fees are and what does it cover. Find out if the HOA will let you lease the property. Some HOA are not friendly to investors. When you do own the condo you are at the mercy of the HOA and must follow all their rules and regulations. Its not for me but it could work for other investors. Do your due diligence up front and know the rules of the HOA before you buy.

@ Ronnie

Thanks for the insight. Even as a resident, I never considered condos because of the high condo fees and communal lifestyle you are forced into. The fees are particularly expensive here in Canada and I will not touch it as an investor since its difficult to extract good cashflow from a condo, even the very affluent types in high income areas.

@ Ronnie

Thanks for the insight. Even as a resident, I never considered condos because of the high condo fees and communal lifestyle you are forced into. The fees are particularly expensive here in Canada and I will not touch it as an investor since its difficult to extract good cashflow from a condo, even the very affluent types in high income areas.

HOA fees vary in what they cover. Usually insurance, some utilities, maintenance.

I don't invest in condos because there aren't many factors where I have control when determining if its a good opportunity for investment.

Be careful @Mike Verrona  that if you plan to resell that the % of rentals doesn't exceed some lenders limits.

wow so many things I didn't know. 

HOA can restrict you from renting your property. I may have to take 2 steps back on this one for a first purchas .

A bad condo association can harm your investment. You have no direct control over how they manage. They can limit the number of rentals. If they are not financially sound they can be hard to get financing. Not just a problem when you buy but a real problem when you go to sell. 

Condos that can't get financing can be a downhill spiral of pricing and vacancy that destroys the association and the development.

I have yet to see condo fees go down...they are always going up !

where did some of you guys start your investment journey?

Yes condo association fees can increase and boards can restrict a unit owners ability to rent. However, typically rental restrictions are contained in a condominium declaration (i.e., the document that creates the condo) and that can only be amended with a vote (usually 2/3) of the unit owners. So, if the unit owners refuse to allow an amendment to the declaration they will still be allowed to rent - I guess my point is that the board does not dictate the rules, per se; they are sometimes subject to a vote. Read your associations governing documents prior to purchase.

Seriously guys. We all live under an association whether that be in the form of a HOA or a government entity. A bad neighbor can have a harmful impact on your SFR investment that you have little control over. GONE are the days when the neighborhood "men" or the cost of ownership controlled the livability of the hood. Think about Justin Beiber as your neighbor. At least a well managed condo association provides certain protections going in and will generally work to protect property values. Condos are good in high priced areas because generally they occupy areas that cannot be duplicated by new developments. This will guarantee and protect your values. As in any investment look long term and buy wise.

I am looking to invest in beach front condos I agree with Ronnie it's all about the numbers. If u owe a Morgage can be a big factor wether or not it is a goo deal or a deal that will have negative cash flow

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